Quote: (01-01-2018 05:11 AM)PK1098 Wrote:
Hi AS,
If we have a serious stock market crash tomorrow and you have 1 million dollars to invest, what industry will you invest in heavily, which industry to dabble in, and which industry to avoid. Personally I would avoid retailing, minin, energy, Tesco's. Is it likely you could turn the 1 million into 10 million or at least 5 million within 5 years?
At a market bottom, you want to invest in unpopular reviled sectors, which ironically are the exact sectors that you named: retail, mining, and energy. In fact, it is exactly your hatred for these sectors that proves the point.
It is mean reversion that pushes price towards the historical average. In this video, Doug Casey makes several key historical points based on research by Mel Faber:
1) Mel Faber studied countries with stock markets that declined 80% or more. On average, those countries saw their stock indices rebound by at least 120% in the next three years after the market bottom.
2) Faber also found similar huge rebounds in different industry groups. He studied U.S. industry groups going back to the 1920’s. When a U.S. industry group fell by 80% or more from a peak, the average return in three years was more than 170%.
Think about the profit opportunities just by using speculative funds (i.e., money that you could afford to lose). The suckers buy assets in hyped manipulated overheated markets and then see their paper profits implode during the inevitable market crash. The smart money buys distressed assets (the most beaten-down sectors) at a market bottom.
http://www.caseyresearchtraining.com/tra...mt721.html
Quote: (01-01-2018 05:11 AM)PK1098 Wrote:
Is it likely you could turn the 1 million into 10 million or at least 5 million within 5 years?
Not likely. If the market tanks 50% and you invest at the market bottom, you will make a 100% ROI when the market returns to pre-crash levels. You could trade options, but it is very tricky (i.e., you must know the pitfalls of the Greeks when trading in a high volatility environment). One way is to invest in very beaten down sectors (e.g., down 80%) and take advantage of mean reversion as discussed above. If a sector drops 80% and then returns to pre-crash levels, then you can make a 400% return (if you are lucky enough to buy at the bottom).